As someone who studied the so-called dismal science at University then practiced it in Canberra for 5 years up till 1988, I understand public finance inside out. It’s no wonder I turned completely grey at 50.
The notion of vertical fiscal imbalance is very real to me. Two numbers sum it up - our councils must manage 33% of the nation’s infrastructure with just 3% of total public sector tax receipts. The Federal Government has income tax, company tax and indirect taxes such as fuel excise, while the states have all of the GST money, stamp duty, payroll and land tax, mining royalties, the list goes on.
Councils have Financial Assistance Grants (FA Grants), a source of revenue that never grows in line with the economy. It only moves in line with population growth and inflation. Even then, it has twice been frozen - first by the Howard Government then the Abbott Government, costing Queensland councils an estimated $80 million and permanently lowering the base for this funding.
Contrary to public opinion, rates are not a growth tax. History shows us that, in the post-GFC era over the past decade, they have only kept pace with inflation. Perversely, councils do worse in periods of sustained population growth as our tax base does not move in accordance with the pace or cost of rolling out new infrastructure. Nor do regulated infrastructure charges close the gap.
It’s really tough for small councils to fund infrastructure renewal and the larger ones to fund growth. The Auditor-General isn’t wrong when he continually raises the problem of asset management in our sphere of government, but the real answer lies not in council chambers nor 1 William Street but with Federal Treasury and its political masters.
Recently, the Federal Government committed to an $8 billion top up of GST payments to the states, yet Canberra’s miserly support of councils remains unchanged. What’s good for the goose is good for the gander.
As I’ve said previously over the past 22 years, local government’s share of the national tax cake has fallen to just 0.55% of the total. You and your communities deserve better
Think of what your council could do for your community if your FA Grants grant went up 80%!
Let’s not be distracted by trinkets and baubles come election time - let’s focus on the main game of at least one percent of total federal taxation for council Financial Assistance Grants. Nothing else will pass muster.
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